Simple Interest

Front

What is Simple Interest?

Back

Simple Interest is a method of calculating the interest charge on a loan or financial product. It is calculated using the formula: Interest = Principal x Rate x Time.

Front

What is the formula for calculating Simple Interest?

Back

The formula for Simple Interest is: I = P x r x t, where I is the interest, P is the principal amount, r is the rate of interest per year, and t is the time in years.

Front

If you borrow $1,000 at a simple interest rate of 5% for 3 years, how much interest will you pay?

Back

Interest = 1000 x 0.05 x 3 = $150.

Front

What is the total amount to be paid back if you borrow $2,000 at a simple interest rate of 4% for 5 years?

Back

Total Amount = Principal + Interest = 2000 + (2000 x 0.04 x 5) = $2,400.

Front

How do you find the total amount paid after a loan with simple interest?

Back

Total Amount = Principal + Interest, where Interest is calculated using the formula I = P x r x t.

Front

What is the difference between Simple Interest and Compound Interest?

Back

Simple Interest is calculated only on the principal amount, while Compound Interest is calculated on the principal plus any interest that has already been added.

Front

If a loan of $5,000 has a simple interest rate of 6% for 4 years, what is the total interest paid?

Back

Interest = 5000 x 0.06 x 4 = $1,200.

Front

What is the interest rate if you paid $300 in interest on a $2,000 loan over 5 years?

Back

Rate = Interest / (Principal x Time) = 300 / (2000 x 5) = 0.03 or 3%.

Front

How much more interest will you earn at a 5% rate compared to a 3% rate on a $1,000 investment over 10 years?

Back

Interest at 5% = 1000 x 0.05 x 10 = $500; Interest at 3% = 1000 x 0.03 x 10 = $300; Difference = $500 - $300 = $200.

Front

What is the total amount earned from an investment of $800 at a simple interest rate of 7% over 6 years?

Back

Total Amount = Principal + Interest = 800 + (800 x 0.07 x 6) = $1,056.